The Farm CPA

Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.

Help! When Should I Sell My Land?!

"If I had a parcel of farmland for sale, would I benefit by selling it this year 2010 or 2011? I was wondering how capital gains tax would affect what I would pay for both years?"

With the passage of the Tax Relief Act of 2010 late last night by Congress, this question has become even easier to answer. The answer is that it does not matter from a federal tax standpoint whether you sell the land in 2010 or 2011. The top capital gains rate for both years will be 15%.

However, if you wait until January 2011 to sell the land, you are not required to pay the tax on the gain until April 15, 2012. This gives you an extra year to invest the money and perhaps earn some interest (although in today's interest rate environment, it may not be much).

Another consideration that you must check is if there are any major changes in state income law for your particular state. Many states have an exclusion for sale of land, however, with the budget deficits that the states are facing, these exclusions may be reduced or eliminated. Check with your tax advisor to see if the state law might make you want to do the sale in 2010 instead of 2011.